According to Michael Snyder (TheEconomicCollapseBlog.com), “The [debt] crisis in Puerto Rico continues to spiral out of control.”
Michael might be right, but I don’t regard Puerto Rico’s plight as big news.
According to Wikipedia, Puerto Rico is over $70 billion in debt. $70 billion’s not chicken feed. But, on the other hand, under Quantitative Easing 3 (QE3), the Federal Reserve was handing out $80 billion per month to stimulate the U.S. economy. Surely, the Fed could cough up enough to solve P.R.s debt problem—right?
I doubt that Puerto Rico’s $70 billion debt is a domino that’s big enough to start a chain reaction that will, eventually, topple the US economy. If I’m wrong, why doesn’t the Fed simply lend Puerto Rico, say, $40 billion, to placate some of its creditors and at least kick the can down the road for another year or two? We could call it “QE4”—a one lump loan of $40 billion to save Puerto Rico.
However, even if Puerto Rico’s debt problem is more noise than news, Puerto Rico’s tactics for dealing with that problem might be illuminating.
Why? Because there are only so many moves on the board. I.e., there are only a limited number of tactics that any insolvent government can use to deal with its excess debt.
By understanding Puerto Rico’s tactics for dealing with its unpayable debts, we can gain a pretty good idea of the tactics available to any other overly-indebted nation (including the U.S.) when it’s finally forced to default.